The world is mourning the passing of George Steinbrenner, who changed the world of sports ownership. Love him or hate him, he had a huge impact on sports and made one of the best investments ever when he purchased the New York Yankees in 1973 for an estimated $8.7 million. It is worth an estimate $1.6 Billion today.
Shortly after hearing his passing, it crossed my mind that he picked the right year to die since there is no estate tax. However, I wasn’t going to post anything about this thought out of respect for George. Of course, I saw an article that addresses Steinbrenner’s estate tax a few hours after hearing the news. From the article:
The death of the 80-year-old Steinbrenner, who had been in poor health for years, highlights a quirky tax situation that has drawn much scrutiny among the moneyed but little on Main Street. Only those with estates valued at more than $3.5 million had to pay under the old law.
Without knowing the exact details of Steinbrenner’s holdings and estate plan, it’s impossible to say how much money will be saved. But estate planners and tax experts say it’s likely that the estate benefited hugely by the timing of his death.
A glance at some numbers suggests roughly how it may work.
Forbes magazine has estimated Steinbrenner’s estate at $1.1 billion. The federal estate tax in 2009 was 45 percent, with the $3.5 million per-person exemption. If he had died last year, his estate could thus have faced federal taxes of almost $500 million, depending on how the estate was structured.
That doesn’t mean his heirs permanently escape all taxes related to his assets. They will still have to ultimately pay a capital gains tax if and when assets are sold. And due to a change in tax law this year, the tax would be applied to the amount by which the assets have appreciated since Steinbrenner acquired them.
Even if the Steinbrenners sold the assets right away, the top capital gains tax rate is 15 percent. Worst-case scenario, depending on how much the assets appreciated after Steinbrenner acquired them: a $165 million tax bill.
That’s a tax break of about $328 million. A-Rod’s 2010 salary: $32 million.
This may motivate the Congress to address the estate tax issue. When people hear about Steinbrenner saving hundreds of millions in estate taxes, the anti-wealthy rhetoric might prompt Congress to act. As for me, I think it was the “Boss’s” master plan to get the better of the IRS, just to let them know who’s boss. Rest in peace, Mr. Steinbrenner.